Bouwens Corporation manufactures a solvent used in airplane maintenance shops. Bouwens sells the solvent to both U.S. military services and commercial airlines. The solvent is produced in a single plant in one of two buildings. Although the solvent sold to the military is chemically identical to that sold to the airlines, the company produces solvent for the two customer types in different buildings at the plant. The solvent sold to the military is manufactured in building 155 (B-155) and is labeled M-Solv. The solvent sold to the commercial airlines is manufactured in building 159 (B-159) and is labeled C-Solv. B-155 is much newer and is considered a model work environment with climate control and other amenities. Workers at Bouwens, who all have roughly equal skills, bid on their job locations (the buildings they will work in) and are assigned based on bids and seniority. As workers gain seniority, they also receive higher pay. The solvent sold to the two customers is essentially identical, but the military requires Bouwens to use a base chemical with a brand name, MX. The solvent for the commercial airlines is called CX. MX is required for military applications because it is sold by vendors on a preferred vendor list. The company sells solvent for the market price to the airlines. Solvent sold to the military is sold based on cost plus a fixed fee. That is, the government pays Bouwens for the recorded cost of the solvent plus a fixed amount of profit. The cost can be computed according to "commonly used product cost methods, including job costing or process costing methods using either FIFO or weighted-average methods." Competition for the government business is very strong, and Bouwens is always looking for ways to reduce the cost and the price it quotes the government. Currently, Bouwens uses a job costing system in which each month’s production for each customer type is considered a "job." Thus, every month, Bouwens starts and completes one job in B-155 and one job in B-159. (There is never any beginning or ending work in process at Bouwens.) Recently, a dispute arose between Jack, the product manager for the military solvent, and Jill, the product manager for the commercial solvent, over the proper costing system. Jack: It is ridiculous to use job costing for this. We are producing solvent. Everyone knows that the chemicals are the same. The fact the B-155 has high-cost labor is because all the senior employees want to work there. We could produce the same product with the employees in B-159. We should be using process costing and consider all the production in both buildings for each month as the batch. Jill: Jack, the fact is that the military requires us to use a special chemical, and their contracts require we keep track of the costs for their business. If we don’t separate the costing, we won’t know how profitable either business is. The following is production and cost information for a typical month, July. M-Solv (B-155) C-Solv (B-159) Total Units started 2,000 10,000 12,000 Materials cost $ 14,000 $ 40,000 $ 54,000 Conversion cost 30,000 120,000 150,000 Total $ 44,000 $ 160,000 $ 204,000 Required: Compute the unit costs of M-Solv and C-Solv for July using the current system (job costing) at Bouwens. Compute the costs of M-Solv and C-Solv for July if Bouwens were to treat all production as the same (combining B-155 and B-159 production). Recommend a costing method that best reflects the cost of producing M-Solv and C-Solv. For your recommended costing system, compute the cost of both M-Solv and C-Solv for July. Compute the unit costs for materials and conversion costs separately. Then compute conversion costs for the factory. Now, compute the unit product cost.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Bouwens Corporation manufactures a solvent used in airplane maintenance shops. Bouwens sells the solvent to both U.S. military services and commercial airlines. The solvent is produced in a single plant in one of two buildings. Although the solvent sold to the military is chemically identical to that sold to the airlines, the company produces solvent for the two customer types in different buildings at the plant. The solvent sold to the military is manufactured in building 155 (B-155) and is labeled M-Solv. The solvent sold to the commercial airlines is manufactured in building 159 (B-159) and is labeled C-Solv.
B-155 is much newer and is considered a model work environment with climate control and other amenities. Workers at Bouwens, who all have roughly equal skills, bid on their job locations (the buildings they will work in) and are assigned based on bids and seniority. As workers gain seniority, they also receive higher pay.
The solvent sold to the two customers is essentially identical, but the military requires Bouwens to use a base chemical with a brand name, MX. The solvent for the commercial airlines is called CX. MX is required for military applications because it is sold by vendors on a preferred vendor list.
The company sells solvent for the market price to the airlines. Solvent sold to the military is sold based on cost plus a fixed fee. That is, the government pays Bouwens for the recorded cost of the solvent plus a fixed amount of profit. The cost can be computed according to "commonly used product cost methods, including
Currently, Bouwens uses a job costing system in which each month’s production for each customer type is considered a "job." Thus, every month, Bouwens starts and completes one job in B-155 and one job in B-159. (There is never any beginning or ending work in process at Bouwens.) Recently, a dispute arose between Jack, the product manager for the military solvent, and Jill, the product manager for the commercial solvent, over the proper costing system.
Jack: It is ridiculous to use job costing for this. We are producing solvent. Everyone knows that the chemicals are the same. The fact the B-155 has high-cost labor is because all the senior employees want to work there. We could produce the same product with the employees in B-159. We should be using process costing and consider all the production in both buildings for each month as the batch.
Jill: Jack, the fact is that the military requires us to use a special chemical, and their contracts require we keep track of the costs for their business. If we don’t separate the costing, we won’t know how profitable either business is.
The following is production and cost information for a typical month, July.
| M-Solv (B-155) | C-Solv (B-159) | Total | |
|---|---|---|---|
| Units started | 2,000 | 10,000 | 12,000 |
| Materials cost | $ 14,000 | $ 40,000 | $ 54,000 |
| Conversion cost | 30,000 | 120,000 | 150,000 |
| Total | $ 44,000 | $ 160,000 | $ 204,000 |
Required:
- Compute the unit costs of M-Solv and C-Solv for July using the current system (job costing) at Bouwens.
- Compute the costs of M-Solv and C-Solv for July if Bouwens were to treat all production as the same (combining B-155 and B-159 production).
- Recommend a costing method that best reflects the cost of producing M-Solv and C-Solv.
- For your recommended costing system, compute the cost of both M-Solv and C-Solv for July.
- Compute the unit costs for materials and conversion costs separately.
- Then compute conversion costs for the factory.
- Now, compute the unit product cost.
![**Instruction for Unit Product Cost Calculation:**
**3. Now, compute the unit product cost.**
*Note: Round your answers to 2 decimal places.*
---
**Cost Components Table:**
| | M-Solv (B-155) | C-Solv (B-159) |
|-----------------------|----------------|----------------|
| **Unit materials costs** | | |
| **Unit conversion costs** | | |
| **Total unit costs** | | |
---
**Navigation:**
- `< Req D2` (Previous Requirement)
- `Req D3 >` (Next Requirement) [Disabled]
---
In this exercise, you are required to compute the unit product costs for the products M-Solv (B-155) and C-Solv (B-159). Fill in the table with the accurate calculation of costs, considering both materials and conversion costs.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff00761e5-6ea2-4b64-9c87-d0591240e351%2F02b7908c-dfd9-4d31-b22d-ebd89fffc815%2Fmeu61s_processed.png&w=3840&q=75)
As per the Honor code of Bartleby we are bound to give the answer of the first three sub parts only, Please post the remaining sub part again Our other experts will assist you with that.
Job Costing: Accounting technique that tracks the cost of materials, labor, and overhead for a particular job. The main purpose of job costing is to determine the profit or loss of each job. Repetitive work or poorly allocated employees can be addressed for the upcoming project through job costs.
Process costing :
Operation costing method employed to determine the value of a product at each process or stage of the production process, applicable where goods produced from a series of continuous operations or procedures. Process costing is employed by businesses that manufacture goods and where production is in repetitive inflow.
Operating costing : It combines the features of job costing and process costing wherein cost can be identified by preparing the cost sheet.
Step by step
Solved in 5 steps with 1 images
